SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
X of the Securities Exchange Act of 1934.
For the quarterly period ended March 31, 1996 or
Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934.
For the transition period from_______ to _______.
Commission File Number 01912
VACU-DRY COMPANY
(Exact name of registrant as specified in its charter)
California 94-1069729
(State of incorporation) (IRS Employer
Identification #)
7765 Healdsburg Ave., Sebastopol, California 95472
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 707/829-4600
Not-Applicable
___________________________________________________________________________
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES: __X__ NO:____
As of May 13, 1996, there were 1,709,599 shares of common stock, no
par value, outstanding.
-1-
PART I
FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The financial statements herein presented for the quarter and nine months
ended March 31, 1996 and 1995, reflect all the adjustments that in the
opinion of management are necessary for the fair presentation of the
financial position and results of operations for the period then ended. All
adjustments during the periods presented, are of a normal recurring
nature.
Liquidity and Capital Resources
Because the Company's operations are seasonal in nature, the Company's liquid
resources fluctuate during the year in a way that changes very little from
year to year. To assist in analyzing the seasonal impact on the balance
sheet, we have included comparative figures as of March 31, 1996 and 1995 in
addition to the prior fiscal year end. Inventory and accounts payable balances
are normally at their lowest level as of the end of the fiscal year and their
highest level as of the end of the second quarter. This seasonal increase
in the accounts payable balance results in a temporary increase in the Debt
to Equity ratio. Adverse weather conditions earlier this year resulted in a
poor apple crop and has required purchasing more tonnage from out of state
than in normal years. Inventory levels as of March 31, 1996 in
comparison with March 31, 1995 are significantly lower as a result of the
smaller California apple crop and an increase in the LIFO reserve of $634,000.
Net working capital increased from $3,775,000 as of June 30, 1995 to
$4,428,000 as of March 31, 1996. This increase was predominantly a result of
the net earnings for the period. The increase in net working capital of
$991,000 from the March 31, 1995 balance of $3,437,000, is a result of the
decrease in borrowings under the line of credit. Accounts receivable were
higher as a result of the increased sales and extended payment terms.
The Company's liquid resources are provided by both external and internal
sources. The Company's largest external source is a revolving line of credit
provided by a bank at the Bank's prime rate. The Company's credit limit of
$3,500,000 ($4,000,000 as of June 30, 1995 and March 31, 1995) is secured by
inventory and accounts receivable. As of March 31, 1996, the Company had
$2,025,000 of available funds under this revolving line of credit. This
compares with $1,075,000 of available funds (on a $4,000,000 limit) as of
March 31, 1995. As of March 31, 1996, the Company was in compliance with all
of the covenants and restrictions related to its outstanding debt. The most
significant source of internal liquidity is the Company's net working
capital. One potential source of long term liquidity, not currently being
considered, is the sale of the idle production facility. This facility is being
leased on a short-term basis except for a small area occupied by Product
Development.
-2-
The Company has established a capital expenditure budget of approximately
$537,000 for the 1995-1996 fiscal year. Through March 31, 1996, the
Company has expended $199,000 of this budget. We anticipate the balance will
be expended during the fourth quarter of fiscal 1996. The Company anticipates
financing these assets through internally generated funds. The capital
expenditure budget will be used to refurbish existing equipment.
Results of Operations
Quarter
Net sales increased $2,522,000 or 56% in the third quarter of fiscal 1996.
Of the net sales for the quarter ended March 31, 1996, 22% came from a single
customer whom we anticipate will not be ordering at such a high level in the
fourth quarter. Although the sales increase was primarily a function of
higher volume, we also experienced higher prices as a result of the apple
shortage.
Other revenue increased $157,000 or 187% compared to the same quarter last
year, primarily as a result of the receipt of reimbursement from the State of
California for expenses previously incurred by the Company to remove two under-
ground storage tanks and monitor the surrounding ground water. This revenue
will be non-recurring. Rental income also increased $25,000.
Cost of sales as a percentage of net sales decreased from 102% in 1995 to 90%
in 1996. LIFO materially affected the comparative results for the quarters. In
1996 LIFO resulted in a charge against earnings of $384,000 while in 1995
LIFO increased earnings by $25,000. Higher apple prices are the predominant
reason for the current years LIFO charge against earnings. The Company
anticipates a smaller unfavorable LIFO impact on earnings during the fourth
quarter.
Selling, general and administrative expenses increased $96,000 or 19% compared
to the same quarter last year. The increase was a result of hiring a new
National Sales Manager, increased professional fees and other expenses.
Interest expense decreased $37,000 as a result of lower borrowings on the line
of credit during the third quarter of 1996 .
-3-
Year-To-Date
Net sales increased $3,599,000 or 22% during the nine months ended
March 31, 1996 compared to the same period last year. Of this sales increase,
85% was a result of volume and 15% price. Of the net sales for the nine
months ended March 31, 1996, one customer accounted for 12%.
Other revenue increased $349,000 primarily from the refund of the reserve
related to amounts owed to the State of California of $110,000, the receipt of
Superfund monies from the State of California of $132,000 and increased rental
income. The first two of these items are non-recurring.
Cost of sales as a percentage of net sales was 90% for both the nine month
period ended March 31, 1995 and 1996. As discussed above, LIFO had a
significant effect on cost of sales for the current period. During the nine
months ended March 31, 1996, the Company incurred a LIFO charge against
earnings of $634,000. During the comparative period ending March 31, 1995,
LIFO increased earnings by $278,000. Although our processed tonnage is down
slightly as a result of the smaller apple crop, our factory overhead has
decreased proportionately.
Selling, general and administrative expenses decreased $108,000 or 7% during
the nine months ended March 1996. This decrease is a result of numerous
factors, including: the effects of the downsizing, lower legal fees as a
result of settlement of litigation(in the prior fiscal year), decreased
expenses related to the SAR plan and other miscellaneous expense reductions.
Interest expense decreased $22,000 between comparative periods as a result of
lower average borrowing on the line of credit.
-4-
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings pending.
Item 2. Changes in Securities
The Company's Line of Credit agreement (dated November 1, 1995)
with its Bank, includes a covenant which prohibits the declaring
or paying of any dividend or distribution in either cash, stock or
any other property on the Company's stock now or hereafter
outstanding, nor redeem, retire, repurchase or otherwise acquire
shares of any class of the Company's stock now or hereafter
outstanding.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
period covered by this report.
Item 5. Other Information
Confoco Representation Agreement
Effective July 1, 1996, the representation agreement with Confoco,
Inc., for the sale of low moisture banana and pumpkin flakes will
terminate. Confoco, Inc., has decided to consolidate the sales
and marketing of its products internally. From July 1, 1995
through March 31, 1996 the Company recorded sales of $1,974,000
of Confoco products with a gross profit of $296,000. The
Company estimates its sales of Confoco products for the entire
1996 Fiscal Year to be approximately $2,500,000 with $375,000 of
related gross profit. For the 1995 Fiscal Year the Company
recorded sales of $3,452,000 of Confoco products with a gross
profit of $532,000. The Company intends to put significant effort
into replacing these lost sales. However, there is no assurance
that such sales can be replaced, or if they can be replaced, the
same gross profit will be realized. If these sales and related
gross profit are not replaced, the resulting decline will have a
material negative impact on the Company's earnings. Under the
Company's agreement with Confoco, for two years from the date of
termination the Company is prohibited from distributing in the
United States, Canada and Mexico, banana products similar to
those currently being sold.
Leased Properties
The Company recently finalized a lease with Fantastic Foods for
the balance of Plant #1( Idle Production Facility) for a term of
two years. Combined with the other tenants, the Company is
currently leasing properties at Plant #1 and #2 with annualized
gross revenues of approximately $500,000. The tenants at
these locations include Fantastic Foods, Inc., Benziger Family
Winery, P&L Specialties and a few other smaller companies.
New President & CEO
Effective May 1, 1996, the Company has appointed Gary L. Hess
as President & CEO. Mr. Hess was formerly Senior Vice President
of Dole Food Company North America. He succeeds Donal Sugrue who
will be retiring. Mr. Sugrue will continue as a consultant to the
Company through the end of the fiscal year. He will also continue
to serve as a member of the Board of Directors.
Item 6. Exhibits & Reports on Form 8-K
(a) Exhibits -
(27.) Financial Data Schedule (by electronic filing only)
(b) Reports on Form 8-K - none
<PAGE>
VACU-DRY COMPANY
CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<C>Nine Months <C>Nine Months <C>Three Months<C>Three Months
Ended Ended Ended Ended
3/31/96 3/31/95 3/31/96 3/31/95
REVENUES:
Net sales $20,304,000 $16,705,000 $7,053,000 $4,531,000
Other 584,000 235,000 241,000 84,000
___________ ___________ __________ __________
Total revenue $20,888,000 $16,940,000 $7,294,000 $4,615,000
COST & EXPENSES:
Cost of sales 18,306,000 14,984,000 6,379,000 4,629,000
Selling, general &
administrative 1,521,000 1,629,000 596,000 500,000
Interest 248,000 270,000 79,000 116,000
___________ ___________ __________ __________
Total cost & expenses $20,075,000 $16,883,000 $7,054,000 $5,245,000
EARNINGS(LOSS) BEFORE INCOME TAXES 813,000 57,000 240,000 (630,000)
PROVISION(BENEFIT) FOR INCOME TAXES 331,000 20,000 96,000 (255,000)
________ ________ ________ ________
NET (LOSS) EARNINGS $482,000 $ 37,000 $144,000 $(375,000)
EARNINGS (LOSS) PER COMMON SHARE $.28 $.02 $.08 $(.22)
AVERAGE COMMON SHARES
OUTSTANDING 1,702,091 1,701,510 1,706,289 1,702,300
See notes to interim financial statements
</TABLE>
<TABLE>
<CAPTION>
VACU-DRY COMPANY
Balance Sheets
(Unaudited)
(Dollars in thousands)
CURRENT ASSETS: 3/31/96 3/31/95 6/30/95 CURRENT LIABILITIES: 3/31/96 3/31/95 6/30/95
<S> <C> <C> <C> <C> <C> <C>
Cash $271 $195 $187 Borrowings under line of credit $1,475 $2,925 $2,351
Accounts receivable 2,744 1,489 1,679 Current maturities of L/T debt 415 475 480
Other receivable 18 235 155 Accounts payable 1,591 1,417 393
Inventories 5,995 7,166 5,414 Accrued p/r & related 644 677 524
Prepaid expenses 152 140 176 Accrued expenses 144 351 391
Current deferred taxes 303 451 303 Deferred factory overhead 600 394 -0-
_______ _______ ______
Total current assets $ 9,483 $ 9,676 $7,914 Income taxes payable 186 -0- -0-
_____ ______ _____
Total current liabilities $5,055 $6,239 $4,139
Net property, plant &
equipment 6,919 7,632 7,421
LONG-TERM DEBT - Net of
current maturities 1,732 2,229 2,105
DEFERRED INCOME TAXES 905 810 912
SHAREHOLDERS' EQUITY:
Capital stock 3,985 3,945 3,936
Retained earnings 4,725 4,085 4,243
Total shareholders' equity 8,710 8,030 8,179
_______ _______ _______ Total liabilities and ______ _______ _______
Total Assets $16,402 $17,308 $15,335 shareholders' equity $16,402 $17,308 $15,335
</TABLE>
See notes to interim financial statements<PAGE>
VACU-DRY COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
1996 1995
Net earnings $482,000 $ 37,000
________ ________
Adjustments to reconcile net earnings to net
cash provided by operating activities -
Refund of reserve related to debt owing to the
State of California (110,000) -0-
Depreciation expense 701,000 641,000
Changes in certain assets & liabilities -
(Increase) in receivables (928,000) (50,000)
(Increase) in inventories (581,000) (2,389,000)
Decrease (increase) in prepaid assets 24,000 (36,000)
Increase in accounts payable 1,198,000 702,000
(Decrease) in accrued expenses (247,000) (888,000)
Increase in acc p/r & related liab. 120,000 81,000
Increase in deferred overhead 600,000 394,000
Increase in income taxes payable 186,000 -0-
Increase (decrease) in deferred taxes (7,000) 51,000
________ __________
Total adjustments 956,000 (1,494,000)
________ __________
Net cash provided by
(used for) operating activities 1,438,000 (1,457,000)
__________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (199,000) (813,000)
_________ _________
Net cash (used for) investing activities (199,000) (813,000)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional borrowings on line of credit 8,736,000 9,688,000
Payments on line of credit (9,612,000) (7,043,000)
Quarterly dividend of $0.05 per share -0- (255,000)
Employee purchase of Company stock 49,000 81,000
Stock buy back of Company shares -0- (69,000)
Principal payments of long-term debt (328,000) (356,000)
_________ _________
Net cash provided by
(used for) financing activities (1,155,000) 2,046,000
_________ _________
NET INCREASE (DECREASE) IN CASH 84,000 (224,000)
CASH AT THE BEGINNING OF THE YEAR 187,000 419,000
________ ________
TOTAL CASH AT THE END OF THE PERIOD $271,000 $195,000
See notes to interim financial statements
<PAGE>
VACU-DRY COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996
Note 1 - The Interim Financial Statements herein presented for the quarter
and nine months ended March 31, 1996, reflect all adjustments
which are in the opinion of management, necessary to a fair
presentation of the financial position and the results of
operations for the periods then ended. The statements are
unaudited and are not necessarily indicative of results for
the full year.
Note 2 - Inventories -
Inventories are stated at the lower of cost, using the last-in,
first-out (LIFO) method or market.
The excess of current cost of the inventory over LIFO cost was
$1,968,000 at March 31, 1996 and $1,334,000 at June 30, 1995.
Inventories at March 31, 1996 and June 30, 1995, consisted of the
following:
3/31/96 6/30/95
Finished goods $5,043,000 $4,926,000
Work in progress 264,000 239,000
Raw materials & containers 688,000 249,000
--------- ---------
$5,995,000 $5,414,000
Note 3 - Borrowings Under Line of Credit -
The Company renewed its line of credit with the bank on
November 1, 1995. The maximum amount available under the line of
credit was reduced from $4,000,000 to $3,500,000. The interest
rate and security were not changed.
Note 4 - Statement of Cash Flows -
Interest and income tax payments reflected in the Statement of
Cash Flows were as follows:
1996 1995
Interest paid $252,000 $281,000
Income taxes paid $130,000 $158,000
Note 5 - Income Taxes -
The effective income tax rate for 1996 is 41%, which compares to
35% for 1995. There were no federal or state tax operating
loss carryforwards for book or tax purposes at March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VACU-DRY COMPANY
(Gary L. Hess)
Date: May 14, 1996 ____________________________
Gary L. Hess, President
(Tom Eakin)
Date: May 14, 1996 ____________________________
Tom Eakin, VP, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10Q FOR
THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMTENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 271,000
<SECURITIES> 0
<RECEIVABLES> 2,788,000
<ALLOWANCES> 44,000
<INVENTORY> 5,995,000<F1>
<CURRENT-ASSETS> 9,483,000
<PP&E> 17,005,000
<DEPRECIATION> 10,086,000
<TOTAL-ASSETS> 16,402,000
<CURRENT-LIABILITIES> 5,055,000
<BONDS> 0
0
0
<COMMON> 3,985,000
<OTHER-SE> 4,725,000<F2>
<TOTAL-LIABILITY-AND-EQUITY> 16,402,000
<SALES> 20,304,000
<TOTAL-REVENUES> 20,888,000
<CGS> 18,306,000
<TOTAL-COSTS> 18,306,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 248,000
<INCOME-PRETAX> 813,000
<INCOME-TAX> 331,000
<INCOME-CONTINUING> 482,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 482,000
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
<FN>
<F1>NET OF LIFO RESERVE OF $1,968,000
<F2>RETAINED EARNINGS
</FN>
</TABLE>
